Overview for Special Purpose Vehicle: Concepts and Applications
Special Purpose Vehicle is a very common finance model nowadays. An SPV or a Special Purpose Entity (SPE) is a legal entity created by a firm (known as the sponsor or originator) by transferring assets to the SPV, to carry out some specific purpose, or a series of such transactions. SPVs have no purpose other than the object for which they are created, and they can make no substantive decisions, the rules governing them are set down in advance and their activities are carefully outlined. The SPV is usually a subsidiary company with an asset/liability structure and legal status that make its obligations secure, even if the parent company goes bankrupt. A corporation can use such a vehicle to finance a large project without putting the entire firm at risk. The gradual recognition and increasing importance of the SPV model for project conception, initiation and implementation deserve a detailed study.
Vandana Shajan (Author)
Vandana Shajan holds a PGDBA from ICFAI Business School, Hyderabad. She is currently working as an Associate Consultant at ICFAI Business Research Center, Kolkata. Her articles have appeared in various magazines published by the ICFAI University Press. Her areas of interest are banking, international economics, investment management and current issues like environment and socioeconomic issues.